Business and Transfer Taxes Seatwork #1 April 2, 2024

Problem 1 – Gross estate, tangibles and intangibles, life insurance, claims against insolvent persons, reciprocity

Mr. Mabuhay died on June 1, 20A1 with the following properties, rights and claims at the time of his death:

Real property
Zonal value P50,000,000
Fair market value per RPT declaration 45,000,000
Shares of stock (domestic shares)
Abaca Company, 10,000 common shares (listed in the PSE)
Par value 4,000,000
Book value 5,000,000
Begonia Company, 100,000 common shares (unlisted shares)
Par value 3,000,000
Book value 4,000,000
If sold at the time of death 3,200,000
Begonia Company, 10,000 preferred shares (unlisted shares)
Par value 3,000,000
Par value plus dividend in arrears 3,500,000
If sold at the time of death 3,300,000
Shares of stock (foreign shares)
Camilla Corporation, 1,000 shares (unlisted)
Par value 1,000,000
Book value 1,200,000
If sold at the time of death 1,500,000
Jewelry
Acquisition cost several years ago 2,000,000
Present pawn value 600,000
Receivables under life insurance policies
Domestic insurance company 1,000,000
Singaporean insurance company 2,000,000
Receivable from Ms. Masaya who has no properties 300,000
Cash in banks
Philippine National Bank, Singapore Branch 2,000,000
Bank of Singapore, Singapore Head Office 5,000,000

The following are the additional information:

a. Abaca Company’s common shares were traded on June 1 at the highest price of P620 and lowest price of P580.
b. Begonia Company owned real properties with book value of P100,000,000 and fair market value of P125,000,000. It had
revaluation surplus of P5,000,000 recorded in its books. It had 1,000,000 issued and outstanding common shares.
c. For jewelry, the practice of pawnshops is to give a pawn value equal to 1/3 of the fair market value of any property
pawned.
Required:
1. Determine the gross estate of Mr. Mabuhay if at the time of his death, he was a citizen of the Philippines.
2. Determine the gross estate of Mr. Mabuhay if at the time of his death, he was neither a citizen nor a resident of the
Philippines.
3. Determine the gross estate of Mr. Mabuhay if at the time of his death, he was neither a citizen nor a resident of the
Philippines. Assume that the country where Mr. Mabuhay resided does not impose death or estate tax.

Problem 2 – Gross estate, various properties, transfers in contemplation of death, life insurance, other transfers

Mr. Segundo, widower, died on October 15, 20A1 with the following properties, rights and claims at the time of her death:

Real property in Bohol, fair market value P60,000,000

House in Quezon City, used as residence (mortgaged to Masaya Banking
Corporation for P3,500,000), fair market value 10,000,000
House and lot in Krabi, Thailand, used as vacation house
(mortgaged to Sawadee Banking Corporation, Thai bank, for 20,000,000
P12,000,000)
Furniture and fixtures in residential house 680,000
Transfers in contemplation of death:
Sale of real properties in the Philippines
Consideration received 2,000,000
Fair market value at the time of transfer 19,900,000
Fair market value at the time of death 20,800,000
Donation of real properties in Bangkok, Thailand
 Fair market value at the time of transfer 9,000,000
Fair market value at the time of death 9,400,000
Sale of personal properties in the Philippines but outside the Philippines
at the time of death
Consideration received 100,000
Fair market value at the time of transfer 1,400,000
Fair market value at the time of death 1,100,000
Sale of personal properties outside the Philippines but within the
Philippines at the time of death
Consideration received 200,000
Fair market value at the time of transfer 400,000
Fair market value at the time of death 1,000,000
Sale of personal properties in the Philippines and within the Philippines at
the time death
Consideration received 900,000
Fair market value at the time of transfer 900,000
Fair market value at the time of death 1,500,000
Insurance proceeds receivables
Life insurance policies taken out by Mr. Segundo on his own life
Policy 1000: Beneficiary was his estate, with power of revocation not
exercised before his death 1,500,000
Policy 3000: Beneficiary was his son, with power to change the
beneficiary 1,000,000
Policy 5000: Beneficiary was his son, with irrevocable designation of
beneficiary 2,000,000
Group life insurance taken out by the employer with estate of decedent
as revocable beneficiary 500,000
Accident insurance for injury sustained while still alive 100,000
Property insurance 200,000
Accounts receivables
Ms. Masaya against whom insolvency proceedings is pending in court.
Ratio of properties to her liabilities is 1:2. 500,000
Mr. Maputi, a Korean residing in Japan with obligation maturing on
December 20A1 1,000,000
Mr. Matangkad, a Korean in South Korea, admittedly insolvent 1,500,000
Shares of stock:
Domestic corporation, certificates deposited in Thai Bank, fair market value 500,000
Foreign corporation, certificates deposited in Thai Bank, fair market value 200,000

Required:
1. Determine the gross estate of Mr. Segundo if at the time of his death, he was a citizen of the Philippines.
2. Determine the gross estate of Mr. Segundo if at the time of his death, he was neither a citizen nor a resident of the
Philippines.
3. Determine the gross estate of Mr. Segundo if at the time of his death, he was neither a citizen nor a resident of the
Philippines. Assume that the country where Mr. Segundo resides provides tax exemption from donor’s tax and estate tax
to Filipinos on transfers of intangible properties.

Problem 3 – Gross estate, exclusions and exemptions

Ms. Masaya, a resident of the Philippines, died on February 1, 20A1. She left the following properties and rights:

Commercial property, fair market value P50,000,000

Residential house and lot, fair market value 18,000,000
Jewelry, fair market value 2,500,000
Agricultural lot in Cebu, fair market value 10,000,000
Agricultural lot in Negros Oriental, fair market value 12,000,000
Agricultural lot in Negros Occidental, fair market value 15,000,000
Agricultural lot in Samar, fair market value 8,000,000
Various personal properties donated to a charitable institution 3,000,000
Accounts receivables 3,500,000
Death benefits from SSS 5,000,000
Retirement benefits from employer 6,800,000
Life insurance proceeds with her sister as revocable beneficiary 7,000,000

The following are the additional information:

a. The residential house and lot was mortgaged for P5,000,000.
 b. The agricultural lot in Cebu was originally owned by Ms. Maganda. When Ms. Maganda died, she left the usufruct of the
said property to Ms. Masaya while the naked title to Ms. Matalino. The said lot was subjected to estate tax when Ms.
Maganda died.
c. The agricultural lot in Negros Oriental was originally owned by Ms. Matiwasay. When Ms. Matiwasay died, she left the
property to Ms. Masaya with a condition that if Ms. Malaki gets married, Ms. Masaya must give the property to Ms.
Malaki. Estate tax was paid when Ms. Matiwasay died.
d. The agricultural lot in Negros Occidental was inherited by Ms. Maganda from her mother. However, Ms. Maganda will own
the property for five years with the obligation to preserve said property. After five years, 60% must be given to Ms.
Masaya’s daughter while Ms. Masaya will retain the remaining 40%. Estate tax was paid when Ms. Maganda inherited the
property four years ago.
e. The agricultural lot in Samar was purchased five years ago for donation to the local government unit as provided in the
last will and testament.
f. The accounts receivables pertain to receivables from Ms. Masaya’s friends. One of them was insolvent. Receivable from
said person amounted to P50,000.

Required: Determine the gross estate of Ms. Masaya.